Apple confirmed Wednesday that it will purchase Beats Electronics for $3 billion, of which $400 million will vest over time. The Cupertino, Calif. company acquires the Beats Music streaming service and the Beats Electronics company that makes the headphones.
The Beats brand will remain separate, but the headphones will sell in Apple's stores and online. As part of the deal, Beats co-founders Jimmy Iovine and Dr. Dre will join Apple.
"I've always known in my heart that Beats belonged with Apple," said Iovine, entrepreneur and record producer, in a statement. "The idea when we started the company was inspired by Apple's unmatched ability to marry culture and technology."
Ad-supported U.S. mobile music revenue reached $1 billion in 2013, and should rise to $1.64 billion this year, per eMarketer. In the U.S., ad spending for online and mobile radio services rose 26.3% in 2013 to $1.65 billion, according to the analysis firm. The market will increase another 23.2% in 2014, reaching $2.04 billion.
USA Today calls the deal "Apple's brashest fiscal move since
buying Steve Jobs' NeXT computer company in 1997." Some fear this deal may not have the same rebirth influence on Apple that Jobs' had with NeXT.
The deal has much more potential than a standalone music streaming service or electronics hardware company. Beats has a partnership with major car manufacturers that could land Apple in the front seat with Chrysler, Fiat and Dodge.